On March 12 1968,
forty-two years ago last Friday, engineers from Arco and Exxon
dropped an exploratory well in Alaska. The well was called Prudhoe
Bay State #1, and it was a big hit, revealing the largest oil
field in North America. You want reserves? Prudhoe Bay had reserves,
barrels in the tens of billions. Several oil companies began
the long work of dividing the spoils and preparing for the extraction
phase. Ten years after discovery the first production wells began
to flow. Maximum flow rate was achieved by 1979, about 1.5 million
barrels per day. Huge! Prudhoe Bay managed to hold that plateau
for an unusually lengthy period. In '89 production began to decline
irretrievably, and it's been dropping about 10% per year ever
since. Today it produces something like 15% of its peak volume.

Looking
at the reserves at Prudhoe Bay can be educational. Since 1977
something like 11 billion barrels have been extracted through
Prudhoe's roughly 1,100 production wells. The total amount of
oil extracted thus far is less than half of what the oil companies
have said exists in the formation. Less than half! And they said
Prudhoe Bay's glory days were over! This might get Orrin Hatch's
mouth a-waterin'. More importantly, it would get his lips a-flappin'.
Reserves, reserves and more reserves. Yep, there are still around
12 billion barrels "in place." Recoverable oil is another
matter. There may be only a few billion barrels left that are
worth going after with current technology. Still, we're talking
billions of barrels left in the formation. Billions. Say
it in a Carl Sagan voice. It seems like a lot. It confuses people,
this talk of reserves. That's the whole idea.

According to
the simple-minded Reserves Myth, all that oil is just sitting
there for the taking: Any problems with declining production
at Prudhoe Bay or other similar old fields could be solved simply
by getting the hippies and Democrats out of the way so we can
suck up the remaining billions of barrels of oil at a more prodigious
rate. Unfortunately for America's oil future, the hippies already
got out of the way, a long time ago, and we already sucked it
up as fast as it could possibly be sucked up. They'll squeeze
oil from Prudhoe for decades to come, but it will never flow
like it did in the '80s because the easy stuff already done flowed.
The same could be said for many once-magnificent oil fields around
the world. The easy oil is gone. In the meantime, estimates for
total world oil reserves have climbed about 60% in the last ten
years.

It's startling
how Prudhoe Bay alone changed the right side of America's total
oil production curve. It's like Mount Meeker in front of Longs
Peak. The EIA chart below tells the story pretty well. Trace
along with me. The long ramping up of production from the beginning
of the auto age. The panicked unleashing of domestic wells in
the late 1960s. The sharp peak of domestic production which occurred
not long after. Prudhoe Bay comes on line in '77 and quickly
plateaus at about 1.5 mbd. Prudhoe Bay's plateau breaks down
in 1989, and there's no easy oil to replace it on the otherwise
declining domestic scene, so down we go again. You can see how
Alaskan oil postponed our date with decline destiny by about
a decade.

The price spike
of recent years lit a fire under oil companies and they accelerated
the use of horizontal drilling, hydraulic fracturing and other
tricks to maximize yields from existing, mostly crapped out old
reservoirs. Domestic production has actually ramped upward a
bit even as demand has declined, the increase represented nicely
at the far right on the chart above. When fancy new technology
meets high oil prices (and a renaissance of natural gas drilling,
which has liquid petroleum as a by-product), it creates these
little ledges and ski jumps on the downhill sides of the production
curves of post-peak oil-producing countries. As we've seen, however,
even a new super-giant field of free-flowing oil won't vanquish
the overall trend, it just postpones it for a while.

Prudhoe Bay,
we hardly knew ye. When I think about the meteoric life of this
giant field, and how so much of its high quality crude was burned
up in late-night Taco Bell runs and other frivolous misadventures
at the edge of the suburban tardscape (I was there), it makes
me ask some big questions. Would we have been better off as a
country if Prudhoe Bay's oil never existed? I'm going to go ahead
and throw down a vote for the affirmative.

We squandered
the resource of Prudhoe Bay. Some of the people of Alaska, and
folks over at British Petroleum, who benefited more directly
from the windfall, probably see it differently. I would say we
Americans proved ourselves unworthy of its gift, and left ourselves
somehow worse off than before it was discovered. We answered
its temporary abundance with SUVs. We fooled ourselves into believing
it was restoring the righteous order instead of offering an extraordinary
and temporary reprieve. We spilled it out into the water and
onto the tundra (just like the hippies said we would). If we
find some new giant oil field -- a real oil field, not "oil
shale" or "tar sands" -- as far-fetched as this
scenario is, let's just imagine, what would we do with it? Would
we use it wisely? Or would we waste that sucker, burn it up with
frivolous driving, let some foreign company walk off with most
of the profits, and end up worse off than we were before? With
history as a guide, I'm going to go ahead and answer in the affirmative
on that too.